Lessons from Covid-19 – Terms & Conditions

We have all learnt a lot over the last year or so, whether it be how effective working from home can be (for some), or how a whole business can pivot to take on new opportunities. In my main work area of commercial contracts, there have been a number of key points that the pandemic has brought to the fore:

•    Force Majeure clauses – A force majeure clause is designed to excuse you from failing to perform some or all of your contractual obligations, when you are prevented from performance by something outside your control. I am sure you can think of a huge number of businesses in this situation during the pandemic, from travel agents to wedding venues.

For many businesses, the force majeure clause was traditionally one of the “boring” clauses shoved in at the end of a set of terms & conditions and then never looked at again. The pandemic has shown that up as a hugely risky and ill-advised approach. It is vital that a critical legal eye is passed over your force majeure clause to ensure that it properly protects your business – a “one size fits all” approach simply doesn’t work.

•    Refunds & re-arrangements – Many businesses are unclear about their rights to offer or require customers to accept a re-arrangement where the contract cannot be performed on an agreed date (or within an agreed time). There is a huge amount of misinformation and misunderstanding about how the different rules apply to different types of businesses, particularly where supplying to members of the public. It is important as part of your risk management (and possibly insurance) planning to understand your true rights and obligations in this area.

•    Supply chain management – as well as considering your position regarding customers, you also need to consider the position with respect to your suppliers. Many businesses focus their attention on the customer side only, and often do not even have supplier terms & conditions – or at least not proper legally drafted ones. Ultimately, many businesses will fall down if they do not have a robust legal relationship with their suppliers in times of crisis.

•    Good faith – contrary to many people’s perceptions, there is no general duty in contract law to act in good faith towards customers or suppliers (at least not in the business-to-business world). This is relevant in two ways. On the one hand, you may not be able to rely as you would hope on your customers or suppliers showing good faith towards you in times of difficulty – all the more reason for you to ensure that your legal position is robustly set out in your contract documents. On the other, you need to think carefully about how you deal with your own customers and suppliers – it is unlikely to be appropriate to stick strictly to the letter of your contract documents in every case, but you are much better off to start from a strong contractual position and make “gestures of goodwill”, rather than starting from a weak negotiating position.

This is just a sample of the types of issues that have been thrown up by the pandemic in client contracts. The key message is that your terms & conditions are a vital part of your business, and must be checked regularly for both appropriateness and being up-to-date.

I offer a free-of-charge brief initial review service to give you a steer as to whether your terms & conditions are along the correct lines – or to give guidance on what needs to change. Please email me on emclaughlin@sillslegal.co.uk for further information.